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Following the release of the UK manufacturing PMI this morning (1 November), Chris Barlow, Partner at MHA, says the government must intervene more, not less, to restore the country’s competitiveness that has been battered by ongoing political turmoil:

“Despite numerous U-turns on recent economic measures from the new Chancellor in an attempt to establish economic stability, UK manufacturers continue to be crippled by longstanding issues including labour and skill shortages, supply chain issues, rising inflation and eye-watering energy prices.

“These have been exacerbated by the lack of stability and diminished confidence caused by the UK’s political turmoil in October, which has severely damaged the sector’s competitiveness within Europe and beyond. While manufacturers broadly welcomed the government’s 6 months of support against the spiralling energy costs, competitors such as Germany have unveiled energy support packages running until 2024. The government’s short-sighted approach, combined with the now reinstated rises to Corporation Tax, have seen the UK become a far less attractive place to invest and do business.

“The government must intervene to restore competitiveness and rebuild manufacturers’ confidence to invest. While permanently setting the Annual Investment Allowance at £1 million from April 2023 is a welcome step, this alone will not provide manufacturers with the confidence to invest in the long term, overcome current economic pressures and drive the country towards net zero by 2050.

“The Chancellor must seize the moment and use the upcoming fiscal statement on 17 November to provide new tax incentives to stimulate greater sector investment and drive productivity improvements. The government should also work alongside the Bank of England to reduce interest rates and drive more spending to support vital services. The pressures of inflation are largely driven by oil and gas prices, meaning interest rate rises will not dampen their impact. It is therefore vital for the government to intervene more and not less, to affect the markets and make the country an attractive place to do business again.

About MHA

MHA is a network ranked the 12^th largest accountancy group in the UK. It comprises of 19 offices nationwide with a strong reputation for specialist industry knowledge and that collaborate and share best practice to provide outstanding client service. The network has 106 partners and 1152 staff across the UK.

MHA is the UK independent member of Baker Tilly International, one of the world’s largest leading international networks of independently owned and managed accountancy and business advisory firms, operating across 148 territories.

* https://www.accountancyage.com/rankings/top-5050-accountancy-firms-2021/

Following the release of the latest UK Manufacturing PMI (3 October), Richard Powell, partner at MHA, see’s little reason for sector optimism as rising inflation and a dramatic downturn of the pound pile further pressure on manufacturer’s margins and their ability to come through economic turbulence unscathed:

“UK manufacturers have been hit hard in September. Despite a small uplift in this month’s PMI Index, dramatic increases in inflation, coupled with the plummeting value of the pound and prohibitive energy prices, have put increasing pressure on business margins and eroded fragile confidence in the sector as the economy heads towards what seems to be an inevitable recession.

“The Chancellor’s mini-budget provided a few reasons for optimism, such as the welcomed extension to the £1 million Annual Investment Allowance and scrapping of planned increase in Corporation Tax. The 6-month energy price cap on the wholesale cost of gas and electricity starting from 1 October will also bring much-needed relief for manufacturers, however the limited time-scale of the scheme will do little to shield businesses from crippling energy costs beyond April 2023.

“While the majority of the sector continues to feel the economic strain, the weakening pound may present a window of opportunity for businesses exporting overseas, particularly to the United States, to benefit commercially and offset broader financial burdens, however the pound’s volatility makes it impossible to plan for the long haul.

“The sector desperately needs the government to introduce immediate measures that will bring short term sector stability, alongside new incentives for greater business investment in areas such as green technology and AI. This must be underpinned by much-needed financial support such as government-support loans, like those seen during the pandemic, to give manufacturers the best chance of coming through coming economic storm intact.”

About MHA

MHA is a network ranked the 12^th largest accountancy group in the UK. It comprises of 19 offices nationwide with a strong reputation for specialist industry knowledge and that collaborate and share best practice to provide outstanding client service. The network has 106 partners and 1152 staff across the UK.

MHA is the UK independent member of Baker Tilly International, one of the world’s largest leading international networks of independently owned and managed accountancy and business advisory firms, operating across 148 territories.

With just two months until the Plastic Packaging Tax (PPT) is introduced (1 April) in the UK to encourage the use of recycled plastic in product packaging, Andrew Thurston, Customs Duty Consultant at MHA, argues the process of proving compliance, or exemption, to this new tax will be especially burdensome for businesses reliant on imports for packaging:

“There are good intentions behind the Plastic Packaging Tax (PPT) but, while it should work well for UK businesses who source their plastic packaging domestically, it will create a very cumbersome administrative burden for those that rely on imports and could potentially prove self-defeating.

“The tax is designed to encourage UK businesses to increase the recycled content of single-use plastic packaging. It will apply to finished plastic packaging manufactured in, or imported into, the UK if the plastic is less than 30% recycled. It means companies will need to meticulously calculate and report their recycled packaging plastic to ensure they remain tax complaint.

“The administrative burden will be felt most acutely by those businesses who purchase goods and packaging materials from outside the UK. To ensure they are compliant with, or exempt from PPT, they must obtain evidence from their international suppliers of the recycled content of packaging. Obtaining the necessary evidence could be a difficult and costly request, potentially rendering any attempts to claim tax exemption cost-prohibitive. Ironically, this could result in businesses ignoring the call to use more sustainable materials as meeting the exemption-threshold might not be worth it financially, defeating the purpose of the tax.

“In addition, any companies purchasing goods from outside the UK will need to review individual products for the weight of the plastic packaging to be able to accurately report quantities and account for PPT. This is a dauntingly long and complex process, especially as hundreds of different products enter the UK through today’s complex supply chains.  The additional costs will ultimately be passed through to the end consumer, resulting in increased retail prices.

“All in all the PPT could prove a huge headache for certain kinds of business, in particular those who package goods and fresh produce for retail, such as supermarkets. More taxes designed to promote sustainability are also likely to be introduced in the near future. UK businesses would be wise to adapt to the new tax landscape as quickly as possible to ensure they are prepared.”

About MHA

MHA is a network of independent accountancy firms, ranked the 12^th largest accountancy group in the UK*. It comprises four member firms with a strong reputation for specialist industry knowledge, which collaborate and share best practice to provide outstanding client service. These include: MHA MacIntyre Hudson, MHA Moore & Smalley, MHA Monahans and MHA Tait Walker. The network has 136 partners and 1,375 staff across the UK.

The MHA Network is the UK independent member of Baker Tilly International, one of the world’s largest leading international networks of independently owned and managed accountancy and business advisory firms, operating across 148 territories.